MEMORANDUM DATE: May 4, 2015 TO: Clean Power Plan for Existing Power Plants; Docket ID: OAR–2013-0602 FROM: Melanie King, Office of Ai r Quality Planning and Standards SUBJECT: April 28, 2015 Meeting with Navajo Nation and Salt Ri ver Project Regarding Proposed Clean Power Plan for Existing Power Plants SUMMARY A meeting was held between EPA and the attend ee(s) listed below on April 28, 2015, to discuss the proposed Clean Power Plan Supplemental Proposal for Existing Power Plants in Indian Country and U.S. Territories. The Clean Power Plan Supplemental Proposal was issued on October 28, 2014, and published in the Federal Register on November 4, 2014. The materials provided by the Navajo Nation are included as an attach ment to this memorandum. ATTENDEES

Navajo Nation (in person) Stephen Etsitty Harrison Tsosie April Quinn Jim Staudt Jill Grant Bethany Fisher Derek Dyson Greg Jones Simon Boyce Anthony Peterman Eugene Quintana Raju Bisht Salt River Project (in person) Kelly Barr Jim Pratt Bob Roessel Navajo Nation (by phone) Greg Kelly Sam Woods Martin Ashley Michelle Henry Arvin Mitchell Bidtah Becker EPA (in person) William Niebling Joe Goffman Pat Childers EPA (by phone) Amy Zimpfer Ann Lyons Anita Lee Deborah Jordan Greg Green Chebryll Edwards Angela Hackel Melanie King Kevin Culligan Nate Topham Rick VetterAttachment: Materials Provided by Navajo Nation1 

# April 28, 2015 Washington, DC 

# Navajo Nation (NN) Carbon Team Meeting with EPA

# Issues to Discuss • Rule for NN • More on the Parity Glide Path

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# NN Rule
• Plants unlikely to give NN authority to regulate them • Therefore, NN expects it will be “necessary or appropriate” for EPA to promulgate a FIP for the Navajo Nation, see 40 CFR § 49.11(a )

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# Does EPA have authority to set less stringent standards on a case - by - case basis?

• “ Section 111(d) guidelines, like NSPS standards, must reflect the emission reduction achievable through the application of BESR. However, both the statute and EPA’s regulations implementing section 111(d) recognize that existing sources may not always have the capability to achieve the same levels of control at reasonable cost as new sources . The statute and EPA’s regulations in 40 CFR 60.24 permit states and EPA to set less stringent standards or longer compliance schedules for existing sources when warranted, considering cost of control, useful life of the facilities, location or process design at a particular facility, physical impossibility of installing necessary control equipment, or other factors making less stringent limits or longer compliance schedules appropriate .” • Background on Establishing New Source Performance Standards (NSPS) Under the Clean Air Act, http ://www.epa.gov/region9/air/listening/BackgroundEstablishingNewSourcePerformanceStd s.pdf 4

# Does EPA have authority to set less stringent standards on a case - by - case basis?
• In addition, CAA § 301(d)(4) provides that “In any case in which the Administrator determines that the treatment of Indian tribes as identical to States is inappropriate or administratively infeasible, the Administrator may provide, by regulation, other means by which the Administrator will directly administer such provisions so as to achieve the appropriate purpose.” • EPA’s authority and obligations to the NN also are rooted in the federal trust responsibility and in the Treaty of 1868 between the U.S. and the NN, which among other things protects coal as a tribal resource

– See also Dec. 1, 2014 Memorandum from Gina McCarthy Commemorating the 30th Anniversary of EPA’s Indian Policy (“EPA must ensure its actions do not conflict with tribal treaty rights”) 

## • The discussion that follows explains why it is inappropriate to use the same base years, building blocks and growth projections for the NN as for the states
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# Other things to consider
• NN per capita electricity demand is much lower than that of neighbors. • Growth has been flat to slightly negative – not 1.3% per EPA assumption • Is there a way to account and adjust for the very low electricity usage by NN and promote NN economic growth and demand?

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# Growth Assumptions
• EPA assumes 1.3% annual electricity growth absent the CPP – same as surrounding states • Historical NTUA demand growth is flat to slightly negative

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# Parity Glide Path
• Compare per - capita energy consumption of NN to that of neighbors

– AZ, CO, NM, UT 

# • Determine equivalent NN demand if NN had same per capita consumption

– Also use correct historical growth rates for NN electricity use to forecast future use 

# • Determine path to make NN equivalent to neighbors in the time rule is implemented
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# Parity Glide Path (PGP) – Option 1

9 Apply adjustment to equation

1,584,579 MWh

# Parity Glide Path (PGP) – Option 2

10 Apply as adjustment to equation

1,537,543 MWh

# EPA’s rate equation, with a suggested adjustment

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### CO 2 

### from fossil units MWh from fossil + MWh from RE + MWh from EE – PGP Adjustment

# Estimated Rate Goals with PGP (using final year)

12 HRI, % Estimated Interim Rate Estimated Final Rate, lb / MWh Estimated Final Mass Cap, short tons Base Year Option 1 Option 2 Option 1 Option 2 Option 1 Option 2 Option 1 Option 2 2005 6 4 2,128 2,184 2,155 2,201 35,181,084 35,928,143 2006 6 4 2,117 2,171 2,143 2,188 35,909,385 36,665,939 2007 6 4 2,132 2,188 2,160 2,206 34,793,659 35,524,517 2008 6 4 2,144 2,199 2,172 2,217 34,973,452 35,709,093 2009 6 4 2,146 2,202 2,174 2,220 34,547,054 35,274,865 2010 6 4 2,072 2,126 2,101 2,145 31,859,858 32,532,739 2011 6 4 2,076 2,131 2,104 2,149 32,618,580 33,310,310 2012 6 4 2,072 2,126 2,101 2,145 31,122,632 31,782,033

# Justification of PGP
• Equity, to account for extremely low electricity use by NN and the need to increase rather than decrease demand • A means to help NN deal with potential for all NGS units operating – and for the possibility that all three NGS units could be operating • As a means of accounting for correct growth rate

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# April 28, 2015 Washington, DC 

# Navajo Nation (NN), BOR and SRP Meeting with EPA

# Recommendation Package for Final Rule Applicability to Tribal Lands • Different base years for establishing goals • Leave BB2 per proposed rule • BB3 – clarify that Renewable Energy projects developed on Tribal lands should be promoted for use by States in developing State compliance plans, not hindered. • BB4 - should not apply • Rate equation per proposed rule, not NODA • General – use Parity Glide Path to account for low electricity use in NN
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# NN Economic Conditions

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# NN economy is extremely dependent upon the two power plants

# BB1 Issues
• 4% or 6% HRI from current HR is not achievable on either plant • Far less operating flexibility than a state due to only two plants • Some operating scenarios at NGS may make mass cap with 2012 basis difficult to achieve

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# Recommend 2006 base year or 2005 - 2007 average in calculating emission rate goals

5 Estimated Interim Rate, lb / MWh Estimated Final Rate, lb / MWh Estimated Final Mass Cap, short tons Base Year Option 1 Option 2 Option 1 Option 2 Option 1 Option 2 2005 2,053 2,098 2,051 2,097 33,480,941 34,237,418 2006 2,044 2,089 2,042 2,088 34,218,132 34,984,647 2007 2,056 2,101 2,054 2,100 33,089,093 33,830,105 2008 2,067 2,112 2,065 2,112 33,259,783 34,005,539 2009 2,068 2,113 2,066 2,113 32,831,697 33,569,493 2010 1,993 2,037 1,991 2,036 30,202,838 30,885,092 2011 1,999 2,043 1,997 2,042 30,958,991 31,659,887 2012 1,991 2,035 1,989 2,034 29,465,849 30,133,848 Option 1: 6% HRI Option 2: 4% HRI

# BB2
• EPA was correct in PSR to acknowledge that BB2 should not apply to NN • Minimum gas usage or regional goal per NODA would be extremely harmful to NN economy

– Already suffering from roughly 30% reduction in coal use at FCPP

– Likely to see 33% reduction at NGS

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# BB3 • EPA was correct in PSR to acknowledge that BB3 would not apply to NN

– Electricity used on NN is mostly hydro

– NN opposes BB3 aspects of NODA 

# • NN recommends that final rule language clarified that Renewable Energy resources located on Tribal lands are promoted for use by States in developing State Plans and goals

– Current language hinders/prevents development of Renewable Energy Resources on Tribal Lands
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# BB4
• NN believes the EPA incorrectly applied regional growth projections to NN

– NN economy and energy use is vastly different than that of neighbors 

# • EPA should consider actual historical growth in demand, per - capita energy use and ability to pay for EE in setting BB4 goals

– Recommend Parity Glide Path adjustment to rate equation to account for disparity in electricity use between NN and regional neighbors

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# Some perspectives on BB4

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# Other Issues
• NN opposes changes to rate setting equation per NODA • See Joint Comments which addresses our other issues

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# Summary • Different base years for establishing goals • Leave BB2 per proposed rule • BB3 – clarify that RE projects developed on Tribal Lands, including NN, are promoted for use by States in developing State Plans • BB4 - should not apply

– General – use Parity Glide Path to account for low electricity use in NN 

# • Rate equation per proposed rule, not NODA
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